Schedule K-1, line 11, code I

[chiefdano]

I have 6 items to report under other in schedule k-1, box 11, code I.  These are:

other interest income-foreign

Other interest income-us

Foreign currency gain- section 988

Trade or business interest expense

other trade or business expense

other ordinary income

I have entered these in the appropriate boxes on the K-1 form, but they do not carry to any schedule E or D or B in the return.   I have read previous forum posts and it seems each of these should be reported on a form manually but I'm unsure of how to report trade or business interest expense and other trade or business expense.  I'm also not sure about the foreign currency gain and ordinary income.  Interest seems like it should go on schedule B.   I've also tried just combining the whole lot using the "Other non-passive income to be reported on schedule E.  The total flows through to schedule E but the K-1 form shows an error because by doing the above it is double counting the code I income on two lines.   Any help would be appreciated.

[Mike9241]

my suggestions but there are other ways to do this. was there an explanation included with the k-1 as to why the first 2 items were not reported on k-1 line 5

total the first two items and enter it on the k-1 as interest income (line 5) this way it will flow to schedule B

separately enter the US interest below the first amount (dome correctly the total will be reported and the US interest will be subtracted on any state income tax return

other interest income-foreign

Other interest income-us

the following needs to be entered on schedule 1 line 8 do not enter amount on k-1

Foreign currency gain- section 988  - description xyz ptsp sec 988 income 

why the following two items weren't used to reduce lines 1,2 or 3 is a mystery. i could understand if this were an investment partnership and the first item said investment interest and the second said investment expense but these are specified as trade or business expenses.  the best I can offer is not to enter these on 11i but reduce line 1 (or 2 or 3 depending on the line used on the k-1) of the k-1 by the total of these amounts.   amounts

Trade or business interest expense

other trade or business expense

this can go on 11i

and I would use the subline other nonpassive income to be reported on schedule E page 2

other ordinary income

understand that except for the 988 amount, the others are guesses. 

[chiefdano]

Thanks for the response.  Interestingly, the K-1 in 2017 and before reported interest income on line 5 but since then they have put in line 11, code I as noted.  Also they don't break out US government interest from other interest which would be helpful for the state return.  US just means originated in the US vs. foreign.  

I think your proposed netting of income and expense is a good solution.  

[chiefdano]

I'm checking with another CPA friend to get a second opinion, especially on the expense netting.  

[Mike9241]

good idea.  i don't read all posts but yours is the first and only one with these unique issues.  please post back what is suggested as that may help others in the future. 

[chiefdano]

I’ve looked at the K-1 you sent me and the question and answer that you included from the Turbo Tax Forum.  I normally think that the easiest solution is the best and I think this matter is not as complicated as the answer you received seems to indicate.  The issue is that the $13,154 included in Box 11, Code I is all ordinary income from a trade or business activity.  Therefore, in my opinion, it should all be included on Schedule E, page 2, line 28 in column k as nonpassive income.  This follows the instructions for Box 11, Code I on statement 2 of the supplemental information provided with the K-1. I don’t think that the 6 items that make up the $13,154 need any separate reporting on the 1040.  The reason is that since these are components of ordinary income from a trade or business activity they do not have to be reported separately as interest income or foreign currency gain, etc.  The “trade or business” character of these items overrides any other character of the items.  I would just report the total of $13,154 on E, page 2.  Since this causes the total to be reported as ordinary income, which is taxed at the highest rate, the IRS should not have any issue with it being reported this way.  I have attached a document showing how I would include these items on the input sheets in ProSeries.  I think you already know that the $650 needs to go on Schedule B and the -$42,735 and $41,095 need to go on D per the K-1 supplemental instructions, so the only issue—if I interpreted your question correctly—is the $13,154.  I hope this helps.